Business Management / Human Resources

Why Diversity is Good Business Practice for Small Business

Ellis Friedman

Updated: Sep 21, 2022 · 10 min read

Toolkit for download in this article

diverse group of people working together

Keap was recently recognized as one of the 100 Best Workplaces for Women in 2015, and it got me thinking about what a great workplace for women looks like, and why small businesses are in such a great position to blaze the trail on improving the landscape of work in general.

In the United States, married women now account for 47 percent of household earnings. Almost a quarter of women out-earn their husbands. (And yet women still make less than men!) Women now own 30 percent of all businesses in the United States. So my question is, why aren’t all workplaces good for women?

And by that, I mean people. Because when a business is a good place for women to work, it’s a good place for people to work.

Why should you care, dear small business owner? Because we’re looking at a world where women and minorities who feel boxed in by corporate America are hitting the eject button and starting their own businesses. In fact, businesses owned by minority women are the fastest growing segment of small businesses, and across all ethnicities, the number of women-owned firms is increasing faster than the number of those owned by men.

But not every woman or minority that leaves the corporate world is looking to start a small business of their own. Many are simply looking for a place where they can make a significant and meaningful impact. Those who don’t start their own businesses may make a great addition to your team. Having an environment that is viewed as a great place to work is a key advantage for your ability to recruit this talent.

So what makes for a great place for people—men and women—to work? I’m going to leave aside all the obvious ones—fair pay, paid paternity and maternity leave, rooms for pumping breast milk and no stigma surrounding it (men want their babies fed, too!) and talk about some of the less tangible things that separate the best workplaces from the rest.


There’s still the pervasive notion in the work world that the need for a flexible schedule is a “women’s problem.” I’ll let this recent New York Times article explain why that’s not the case:

"[Flexibility] looks like a “women’s problem,” but it’s not. It’s a work problem—the problem of an antiquated and broken system. When law firms and corporations lose talented women who reject lock-step career paths and question promotion systems that elevate quantity of hours worked over quality of the work itself, the problem is not with the women…

Bad work culture is everyone’s problem, for men just as much as for women. It’s a problem for working parents, not just working mothers. For working children who need time to take care of their own parents, not just working daughters. For anyone who does not have the luxury of a full-time lead parent or caregiver at home."

Since only a third of mothers don’t work, that’s two-thirds of mothers who must find a balance between work and home life. Pair that with the single working parents who need flexibility, and you’re talking about a huge part of the working population—man or woman—that has to deal with the logistics of childcare.

And it’s not just that flexibility itself is necessary—the whole mindset surrounding the need for flexibility needs a tune-up as well. Studies have found that men who ask for flexible work arrangements are perceived better than women who ask the same thing.

For small businesses, the issue of flexibility is becoming an important component of attracting talented millennial workers. In 2013, PricewaterhouseCoopers faced a retention crisis. They conducted a study to find out why their employee exodus was so severe and discovered the following:

“Millennials do not believe that productivity should be measured by the number of hours worked at the office, but by the output of the work performed. They view work as a ‘thing’ and not a ‘place.’” The long hours at the office and status quo work-life tradeoff weren’t working for the company’s young workers; they wanted more flexibility, so they went looking for it.”

To bring home the point, Forbes reported in 2013 that “45 percent of Millennials will choose workplace flexibility over pay,” and that “87 percent of companies report[ed] a cost of between $15,000 and $25,000 to replace each lost Millennial employee.”

Many small businesses are on the forefront of creating workplaces where many or all employees are entirely remote. And since between 2005 and 2012 the number of people working from home increased nearly 80 percent, small businesses are in a prime position to attract and retain talented candidates who seek that flexibility—and thus to beat the corporate giants at their recruiting game.

Easier said than done you say? While it can be challenging to balance non-traditional work schedules and remote working situations, there are great solutions out there that make it easier. Use this great list from Fast Company that showcases some of the best digital tools to manage communication and workflow remotely.

Diverse leadership

Women make up almost 60 percent of the workforce, yet only 33 percent of people in the workforce say they have a boss who is a woman.

Women bring a lot to the management table: Evidence shows that female managers can be better at engaging their employees than male managers are—especially if they’re working with another woman. The same study shows female employees also tend to be more engaged than male employees. So hiring women and making them managers can actually make your overall employee base more engaged, and more engaged means more results. Plus, women can be better at being transformational leaders, in which they act as inspirational role models, motivate others to go beyond the confines of their job descriptions, and foster innovation, among other things.

In fact, in a 2011 survey of more than 7,280 executives, women were rated higher than men in leadership effectiveness at every management level. However, the higher the management level, the higher proportion of men. If women are viewed as better leaders, then bringing more women into management roles may substantially impact businesses through happier employees, productivity, and more revenue.

Of course, this doesn’t mean that all managers should be women, or that men should be overlooked solely in favor of women. It means that women need the support of men who recognize that promoting women will benefit men and women, and acknowledge that when executives are looking for people to promote, they should make a concerted effort to not assume that men are better leaders.

Small business owners are in the prime position to help achieve this parity—since they’re nimble and growing fast, small businesses can attract and actively seek out qualified women looking to be leaders.

The census reports that it will take 65 years at the current pace until women and men are equally represented in executive suites and boardrooms. And a paltry 15 out of 300 of the largest U.S. companies have CEOs who are women.

And yet studies show that diversity executive teams correlates with a 53 percent higher return on equity as well as higher performance and more innovation. In addition, companies with the highest percentage of women on the board of directors showed a 66 percent higher return on invested capital than companies with the fewest women on the board. 

As McKinsey & Company writes:

"We know intuitively that diversity matters. It’s also increasingly clear that it makes sense in purely business terms. Our latest research finds that companies in the top quartile for gender or racial and ethnic diversity are more likely to have financial returns above their national industry medians."

Open and real communication

At Keap, one of our values is practicing open and real communication. Open and real communication is good for everyone, but it isn’t just limited to project delegation or conflict resolution. It’s about being able to talk with your manager and co-workers about delicate situations like the need for a flexible schedule or even the fact that women are underrepresented without fear of repercussion.

One of the first, and most important steps, to successful communication is to find out how people like to be communicated to. While men and women have often been viewed as having different communication styles, I would challenge that people simply have multiple communication styles.

To find ways to communicate more effectively, a great way to start is to utilize a personality or communication style assessment. At Keap we use the Real Colors, which helps uncover temperament and communication preferences. Tools such as this can help make communication much more effective in any organization, and can help eliminate any potential misunderstandings or disruptions—creating a better workplace for all.

Creating a frame to help start the conversation is the first step. Step two (and one of the most important steps) is asking someone how they like to communicate, and keeping the dialogue open throughout your working relationship.

Creating a flexible, diverse company with exceptional communication isn’t just a great place to work, it becomes a space for your employees to thrive—bringing new ideas, connections, and ultimately growth.

Perhaps most importantly, open and real communication becomes a competitive advantage, helping small business owners retain their top talent that might be otherwise lured away by larger, better-resourced corporations. In it’s early days, Pixar learned this lesson well during their work on "Toy Story." As Fox Business recounts:

"During the making of "Toy Story," production managers tried to force artists and technologists to follow the chain of command when discussing the project with others. The artists and technologists rebelled and started acting disrespectfully to production managers. It got so bad that production managers no longer wanted to work at Pixar. Catmull and Lasseter gathered the company and made it clear that going forward decisions made needed to respect the chain of command but 'anyone should be able to talk to anyone else, at any level, at any time, without fear of reprimand...people talking directly to one another then letting the manager find out later was more efficient than trying to make sure that everything happened in the ‘right’ order and through the ‘proper’ channels.' Although it took time for people to adjust to more open communications, by the time Pixar completed "A Bug’s Life," production managers were viewed and treated with respect. Connection, community and unity were restored."

Really, it all boils down to communication. Without a solid, open line of communication, companies can’t be a great place to work. To get great management or meaningfully contribute to a project, you have to communicate it and be honest about what you want and why you want it.

It’s not about whether a company is a great place to work for women, specifically. If a company is a great place to work for women, it is inherently a great place to work for men as well. Equal pay, engaging and inspiring management, and promoting a healthy work-life balance make everyone happy. Year after year, the companies on “best places to work” lists, whether or not the list is specific to women, are successful in ways that can be measured in customer loyalty and revenue, in addition to employee happiness. Perhaps that is the key to business success: Make it a great place to work and give employees something to believe in, and they will be motivated to make the company a success.

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